Is Culture the Solution to Big Pharma's Innovation Problem?

Virtually every major player in the pharmaceutical industry, from Dow components Pfizer and Merck to European giants Sanofi and GlaxoSmithKline, has been affected by patent cliffs. Eli Lilly is one example of a company that continues to battle patent expirations; its top-selling drug, Cymbalta, lost patent protection this month, and the company's top line will take a sizable hit this year. 

What can pharmaceutical companies do to make sure that their pipelines are constantly full of promising, ground-breaking therapies that have a high probability of getting on the market? In short, how can pharma companies foster innovation?

In the following video, Bernard Munos, the founder of the InnoThink Center for Research in Biomedical Innovation, discusses this topic with analyst Max Macaluso. A transcript follows.

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Max Macaluso: Bernard, you talked a little bit about culture, how that fosters innovation. That's something that here at The Motley Fool we try to do internally, and also when we analyze investments we're always intrigued by the factor that culture plays in a company's success. In your opinion, what kind of culture does Big Pharma need to be successful today?

Bernard Munos: OK, let me be very clear there. Innovation is a byproduct of culture. It is not a byproduct of organization. It is not a byproduct of how much money you throw at it. It is not a byproduct of the processes that you use to run it. Innovation is strictly a byproduct of culture. Therefore, you need to create a culture that will foster innovation.

Now, there has been some very interesting research that has been done since the mid-'90s -- it started, actually, with a study from the Nobel Foundation -- that has uncovered some of the key drivers of innovation. It's not really as complicated as it seems. In fact, there are two essential drivers that have been proven to produce innovation when they are combined together in a business model.

You've got to have bold thinking -- the bolder, the better -- and you've got to have cross-pollination in order to enrich your thinking further. Any model that fosters bold thinking and fosters cross-pollination will see innovation emerge as a byproduct.

This is pretty much the way it used to be in the pharmaceutical industry back in the '70s, and even in the '80s. The research organizations of Big Pharma were spiked by what I call the "mad scientists" -- the people who are hard to manage, but are brilliant and have different ideas, different perspective on just about anything, which makes them hard to manage, but this the sort of cross-pollination that you need in order to collectively be smarter and come up with better science and better drugs.

By purging those "mad scientists" from the industry in the 1990s, we really hurt innovation, and the results speak for themselves.

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